Nikkei Asia reported on November 25 that the Japanese government is considering refunding sales tax to tourists after they leave the country, in order to prevent law-evading behaviors.
Under the new regulations, tourists will have to pay consumption tax at the time of purchase and receive a tax refund after leaving Japan. This is also a typical practice in other countries, including Vietnam.
The change will take effect in fiscal 2025 or later, as department stores and other retailers in Japan need time to prepare.
Japanese law provides for a consumption tax exemption for foreign visitors staying for less than six months, and only applies to items that are allowed to be taken out of the country. Therefore, businesses will have to check, explain the tax exemption conditions clearly and keep records for customers.
Foreign tourists wait outside the famous sumo-themed restaurant Yokozuna Tonkatsu Dosukoi Tanaka (Japan) on June 30, 2023 - Photo: REUTERS
Currently, Japan deducts direct consumption tax for tourists when they buy goods at duty-free or special counters. Some people have found ways to circumvent the law, selling products at tax-covered prices to make a profit.
In December 2022, Apple's headquarters in Japan was investigated by the country's tax authorities and asked to pay an additional 87 million USD (at current exchange rates) in unpaid consumption tax for 2 years, starting from September 2021.
A survey conducted by the National Tax Agency of Japan from July 2021 to June 2022 found 24,000 cases of companies not declaring consumption tax, with the total amount to be collected reaching 86.9 billion yen (nearly 600 million USD).
There are now about 53,000 duty-free shops in Japan, a tenfold increase from 2013. Tourist demand for shopping in the country is gradually recovering after the COVID-19 pandemic, due to the falling yen exchange rate and the relaxation of border restrictions.
The Japanese government is discussing and will provide details in a tax reform outline to be announced in December.
